Real-terms UK pay fell at fastest rates for 20 years at end of 2022

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Average real-terms pay in Britain fell at among the fastest rates for more than two decades at the end of 2022, as public sector pay deals continue to fall behind the private sector during the cost of living crisis.

The Office for National Statistics said wages in real terms declined by 2.6% in the three months to November, among the largest falls in growth since comparable records began in 2001.

Without adjusting for inflation, annual growth in regular pay for all workers, excluding bonuses, strengthened to 6.4% over the period. It was the fastest growth since 2001 – excluding the pandemic, when official pay figures were distorted by the furlough scheme – but still well below the current headline inflation rate in the UK of 10.7%.

Wage growth in the private sector, before adjusting for inflation, reached 7.2%, as wages in the public sector continued to trail significantly behind with a growth rate of just 3.3%.

The figures come as the government comes under mounting pressure to increase public sector pay amid rolling disputes, after teachers in England and Wales voted to strike and as nurses prepare to take further action.

Almost half a million working days were lost in November, the highest level since November 2011, as railway workers and at Royal Mail postal operatives walked out on strike. The ONS said the number of days lost to strikes since June was the highest in more than 30 years.

Jonathan Ashworth, the shadow work and pensions secretary, said the figures showed the government was “bereft of ideas” for tackling the cost of living crisis and supporting people to work.

“Real wages are plummeting, almost two and a half million people are out of work because of sickness and far too many people – especially the over 50s – aren’t getting the support they need to either stay in work or to go back to work.”

Inflation eased from a 41-year high of 11.1% in October to 10.7% in November as households come under pressure from soaring energy bills and the rising cost of the weekly shop. Official figures due on Wednesday are expected to show another modest decline to 10.6%, still significantly higher than average wage growth and well above the Bank of England’s 2% target.

The chancellor, Jeremy Hunt, said the best way to help workers’ pay go further was to “stick to our plan to halve inflation this year”.

“We must not do anything that risks permanently embedding high prices into our economy, which will only prolong the pain for everyone,” he said.

Unemployment remained at 3.7%, close to the lowest level in almost 50 years. Job vacancies fell for a sixth consecutive quarter, but the number of openings remained at historically high levels at more than 1.1m.

Economists said the rise in pay growth, before adjusting for inflation, was likely to add to pressure on the Bank of England to raise interest rates at its next meeting in early February as the central bank responds to the soaring cost of living.

Threadneedle Street has said signs of a tight labour market and stronger wage growth could fuel persistently higher rates of inflation. The Bank has raised interest rates nine times in succession, to 3.5%, with City economists predicting further increases despite pressure on the economy.

Ashley Webb, UK economist at the consultancy Capital Economics, said: “We still think the labour market will loosen eventually.

“But the fact that the labour market remained tight and wage growth remained strong, combined with the economy proving to be more resilient than expected in November, will only increase the Bank of England’s fears that inflation, despite falling, is still persistent.”